While investing in Emerging Markets is not always as convenient, it can pay off handsomely.
With favourable demographics, an ambitious work force and a cost advantage versus rivals like China, Vietnam is an exciting investment destination.
Long Term Perspective Needed
Vietnam's vision of economic developments focused on highly productive, cost-effective manufacturing is paying off, driving record foreign direct investment flows.
Strong Growth Numbers
In 2018, Vietnam grew by 7.1% largely because of the agriculture, industry and construction, and services, (wholesale and retail), transport, banking and finance, education and healthcare sectors. Manufacturing production and foreign direct investment (FDI) remained significant growth drivers.
Surge in FDI
The manufacturing and processing sector had the most interest from investors.
FDI increased to US$19.1 billion in 2018, keeping the economy on a robust expansion path. The manufacturing and processing sector garnered the most interest from investors accounting for 47% of FDI, the real estate sector was ranked second with 18.5% of FDI, and the retail sector third with 10.3% of FDI.
High transport and energy infrastructure investments remain important growth drivers, while industrial production will be boosted by continued opening of new multinational enterprises in labour-intensive, export-oriented manufacturing and processing industries.
However, unfavourable weather conditions could undermine agricultural output and mining production.
Vietnam's Competitiveness
Exports are likely to suffer if the trade war between the United States and China reduce imports. However, Vietnam could also benefit if China relocates manufacturing to Vietnam.
Vietnam has a competitive wage structure which is less than half of the average wage in China. Vietnam has a literacy rate of 93%, it ranks close to Germany for Mathematics, Reading and Science grades. It outperforms the U.S. and the majority of Western Europe on that score.
Vietnam and China
As China is no longer a low-cost destination, labour-intensive production will shift away to Southeast Asia. Vietnam (together with Indonesia and Thailand) are expected to benefit from this. Labour-intensive industries like textiles, apparel, footwear, and furniture are the first industries to leave China.
The on-going trade war between China and the US has also made many companies realize that they must have an alternative production site outside of China.
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